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DC Chapter Introduces Global Warming in Pepco Rate Case

On December 3, the DC Chapter's Energy Committee lawyers submitted a briefing to the DC Public Service Commission (PSC) on a rate case by Pepco to increase its charges to DC residents for electrical service. The Sierra Club, joined by Grid 2.0 Working Group, argued that Pepco should be required to upgrade its grid infrastructure to improve reliability and enable broad-scale incorporation of renewable power. We argued that global warming has increased the likelihood of more frequent storms and power outages, and that before the PSC grants any further rate increase, Pepco should be required to improve its electrical grid design to move away from large fossil fuel generating plants toware decentralized distributed power, and thus protect and preserve environmental quality.

Pepco's request, submitted in March of this year, was to increase its authorized rate of return to investors and increase charges to ratepayers by $52 million. Pepco made this request less than six months after the PSC granted it a rate increase in 2012, and they have already announced plans to seek another rate increase in 2014.

To support our argument, we cited a 2009 study conducted by the U.S. Department of Energy on Service Reliability for Electric Utility Customers, which concluded that planning decisions to achieve reliability must be "economically efficient" rather than simply "keeping the lights on". We argued that Pepco's existing grid is increasingly unreliable and lacks resilience to severe weather (remember the Derecho storm of 2012) or basic provisions for DC's most vulnerable residents during power outages. Moreover, the current “radial design” of the grid is poorly suited to incorporation of distributed and intermittent renewable power (for example from solar panels on roofs or residents and businesses).

We presented industry data that places Pepco in the bottom quartile of rankings on reliability among U.S. utilities over the past decade. In 2003, however, Pepco paid record high shareholder dividends and employee compensation packages while it initiated a program of spending reductions. In 2005, Pepco reduced its staff, its maintenance, as well as its budget for equipment replacement and tree trimming for infrastructure. We pointed out that by 2012, Pepco was employing 58% fewer linemen than it had in 1992. This neglect of its infrastructure has caused Pepco to fall behind the rest of the country, so that Washington DC experiences 70% more power outages, and lasting twice as long as most other major U.S. cities. We further argued "piecemeal" smart grid investments have been inadequate compared to other U.S. utility companies. We argued that to meet the requirement of being "just and reasonable", Pepco needs to incorporate important social goals into its program, such as lifeline rates (subsidized rates for low income households), and environmental surcharges.

According to DC's Clean and Affordable Energy Act, the PSC is required to consider the conservation of natural resources and the preservation of environmental quality. This, we argued, would include the public and environmental health effects of CO2 emissions from fossil fuel combustion, the consequent threat of global warming, and the disruptions associated with a warming climate. However, the PSC has not enforced that provision, as Pepco has not adopted a comprehensive plan to mitigate global warming through support of improved efficiency, conservation, and use of renewables in its grid.

We believe that it is proper for the PSC to issue a directive or Order putting Pepco on notice that its past reliability performance is unacceptable and that routine rate increases will not be granted without better coordination and improvements to its infrastructure. The PSC should create a Workgroup that will require the development of a comprehensive reliability investment plan with recommended actions to be completed before Pepco can request any further rate increases. Pepco has failed to maintain or improve its electric grid for too long without proper recourse, and it has failed to address the risks of global warming for the reliability of its services. Stronger, tougher oversight is necessary now to bring our city up from the depths of grid futility to a position it should be in as a world leader in grid reliability.